Let Crest Appraisal Services help you determine if you can get rid of your PMI
It's generally understood that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things settled down.
The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Crest Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in Seattle, King County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: